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For an investor-friendly mineral policy

Print edition : May 09, 2003 T+T-

Interview with Union Minister Ramesh Bais.

The initiation of basic structural reforms in 1991 brought in its wake a liberalised policy regime for the Indian mining sector, with the curbs on private sector participation eased to attract foreign capital and technology. What has been the experience of the decade of reforms? Union Minister of State (with independent charge) for Mines Ramesh Bais shares with B.S. Padmanabhan his assessment of the impact of liberalisation, and outlines the steps taken to make the mining sector investor-friendly and emerge as a leading one at the global level. Excerpts from the interview:

Ten years have passed since the National Mineral Policy (NMP) was announced in March 1993 ushering in reforms in the mining sector. What has been its impact in terms of increasing production and attracting foreign capital and technology?

The National Mineral Policy aimed at liberalising the induction of private capital and inflow of state-of-the-art technology in the mining sector. As regards production, the index of mineral production with 1993-94 as the base year has shown a positive growth with the index already at 137.89 for the period April 2002-February 2003. What is particularly encouraging is the performance of non-fuel minerals, for which the policy regime was liberalised under the NMP. The index of mineral production for these minerals for the period April 2002-February 2003 rose to 156.02. The reforms in mining have shown good results in attracting foreign capital. The Foreign Investment Promotion Board has so far approved 72 proposals in the mining sector, indicating an expected foreign direct investment inflow of Rs.4,018 crores. Indian subsidiaries of major international companies have taken reconnaissance permits for exploration in base metals, gold and diamonds, bringing in state-of-the-art technology for exploration.

In the light of the experience gained, what measures have been taken to make the policy more investor-friendly, provide a level playing field for private entrepreneurs and cut delays in granting mineral concessions?

We have taken positive steps to make the mineral policy more investor-friendly. Devolving more powers to the States, providing greater stability of tenure of mineral concessions, allowing the private sector to enter the field of mining in respect of minerals which were earlier reserved for exploitation by the public sector, and prescribing time limits for conveying decisions on applications for the grant of mineral concessions and for the approval of mining plans, are measures that will make the system more transparent and efficient.

Although the NMP allows private sector participation, State governments still have an important regulatory role and there are reports that several governments are not following strictly the spirit of liberalisation while issuing prospecting licences and mineral leases to private sector parties. Some governments are reported to have large areas reserved for exploitation by the State and have kept them idle. How do you propose to tackle this issue?

I do not think so. With successive amendments in the Mines and Minerals (Development and Regulation) Act, 1957 and the Rules framed thereunder, State governments can take decisions without reference to the Central government on granting mineral concessions for all minerals except fuel minerals, atomic minerals and 10 other major minerals. For renewal, amalgamation and granting of lease over disjointed areas also the States have been delegated powers to decide in respect of the 10 non-fuel and non-atomic minerals. However, the powers are to be used with responsibility. The Act provides for the filing of revision applications before the Central government by any aggrieved party against any order passed by a State government, and appeal against the Central government's decision in the matter lies only in the High Court. As regards reserved areas, it has been decided that reservation will be allowed for only a limited duration. If these areas are not exploited in this duration it would be de-reserved. State governments have been asked to review previously reserved areas and de-notify surplus areas. Many areas have been de-reserved by governments after reviews.

There has been a complaint that the Centre is ignoring the interests of State governments while fixing royalty rates. What is your reaction and response?

Revision of royalty rates is a broad-based exercise. The Ministry of Mines constitutes a Study Group comprising representatives of State governments and industry and so on for the purpose of revision in the rates of royalty on major minerals other than coal, lignite and sand for stowing. The Study Group elicits the views of all the State governments, mineral industries, the concerned Ministries/Departments of the Central government and so on through a questionnaire... and these are considered and examined by the Study Group before finalising its report. The report is examined by the government in consultation with various Ministries, departments and so on and finally the revision is effected. Thus there is no question of ignoring the interests of State governments.

Mining is no longer confined to land area and has extended to offshore areas. What are the salient features of the new legislation with regard to offshore mining and how do you propose to address the concerns of different departments, such as defence, fisheries and petroleum, that have stakes in offshore areas?

The Offshore Mineral (Development and Regulation) Act 2002 has been enacted to permit exploration and mining in offshore areas by the private sector. It has provision for three types of operating rights, namely reconnaissance permit, exploration licence and production lease. The reconnaissance permit will be granted for a maximum period of two years with a provision for renewal for another maximum period of two years. The exploration licence shall be granted initially for a maximum period of three years with a provision for renewal so that the total period of an exploration licence does not exceed five years. The production lease shall be granted initially for a period not exceeding 30 years with the provision for renewal for 20 years. Offshore areas would be released periodically for the grant of operating rights only after consultations with Ministries and departments having a parallel interest in the areas. In order to safeguard defence and security interests, the provisions of the legislation shall be in addition to, and not in derogation of, any other law for the time being in force in the offshore areas.

What is the direction that you would like to give to the reform process in the mining sector to make India a leading player in the world mineral market?

Reforms in the mining sector are undertaken as per felt needs. The Ministry of Mines holds regular interaction meetings with all stakeholders in the sector, including State governments and investors. These meetings provide inputs for further reforms. In the last five years, three meetings of the Mineral Advisory Council, three meetings with investors and two conferences of State Ministers of Mining and Geology have been held. As approved at the Conference of State Ministers of Mining and Geology held on January 22, 2003, it has been decided that the Rules framed under the MMDR Act, 1957 shall be amended to provide, inter alia, for a detailed mine closure plan, a minimum size of mining leases and revised simple guidelines for the determination of price for assessing ad valorem royalty. The amendments in the Rules have been notified.

How do you propose to address the environmental concerns in the context of mine development?

Yes, the environmental concerns of mine development are genuine. The National Mineral Policy recognised the concern and directed that no mining lease would be granted to any party, private or public, without a proper mining plan including an environmental management plan, approved and enforced by statutory authorities. In accordance with the policy, the mining law provides that all mining operations should be done in accordance with mining plans. The mining plan, inter alia, specifies the details of geology of the area, a plan of the area showing the natural water courses, limits of reserves and other forest areas, assessment of impact of mining activity on forest, land surface and the environment including in terms of air and water pollution, details of the scheme of restoration of the area by afforestation, land reclamation, use of pollution control devices and so on. The Central government enacted the Mineral Conservation and Development Rules, 1988, which has prescribed detailed Rules regarding the scheme of prospecting, mining plans and measures to be taken for the protection of the environment. The Indian Bureau of Mines (IBM) enforces these Rules and in case of serious default it is empowered to close down a mine. The Ministry of Mines and the Ministry of Environment and Forests hold regular interaction meetings with the mining industry and much of the procedural simplifications and awareness building has come about through this constructive approach.

What has been the role of the Geological Survey of India, the Indian Bureau of Mines and the Mineral Exploration Corporation of India in the context of liberalisation in the sector?

In view of the changing environment, we set up an experts committee to revise the charter of functions of the Geological Survey of India. In the light of the recommendations of the committee, the GSI will focus on the creation of a theme-based relational database with provision for computerised archival and retrieval of geo-scientific data. The investigation carried out by the GSI will be more in the project mode to meet the demands of the private sector.

Similarly, the mandate of the IBM is revised in view of the growing environmental concerns, to play a pro-active role in minimising the adverse impact of mining on the environment by undertaking environmental impact studies on a regional basis. The IBM will provide technical consultancy services on a promotional basis to the private sector. MECL has oriented itself to the new environment by creating a marketing cell under a business development division to fulfil the exploration needs of private entrepreneurs for better commercial exploitation of mineral prospects.